Economics of Carnival

With 2008 past and on the record books as the second worst year in the history of the United States Economy, one must ponder what 2009 will bring. Doing a recap of 2008, we can see how the year went from being one with the best potential to being one of the worst years on the books. Can Carnival be the turning point that makes the 2009 year a great success?

We saw a strong and outstanding first quarter for most businesses. Here in the Caribbean travel was up for most islands by 16% with an increase in revenue and additional spending dollars with capital improvements and programs throughout the islands.

Then the second quarter came in, which was devastating with the financial industry and directly hurt many small business owners with the credit crunch. When a small business has a smaller cash flow, credit is one of the main ways to stay afloat.

Third quarter showed the weaknesses of many of manufacturing businesses throughout the world. With the reduction of orders and the increase of fuel cost, one was left to wonder how anyone can stay open and even think of a profit. With the current trends suggesting this was not a one quarter slow down and a potential for an entire Global Economic Recession, many of business cut back on their capital expenditures and tourist alike saw a reduction in their disposable incomes.

Looking at the fourth quarter we saw a major drop in retail sales which not only has a direct cost on goods, but also the employment of many workers throughout the mainland and Caribbean. With large retailers closing down, layoffs, leaner inventories, and reduction in cost, there was dramatic change here in the Caribbean.

With the recap of the past four quarters it is easy to see that staying afloat in these turbulent times in not a necessity but a requirement. With tourism dropping rapidly in the Caribbean, this leaves many of small business wondering why or how they will stay a float. As everyone knows the Caribbean has two major tourist seasons. During the months of November, December, January, February, March, and April the tourist season is in full swing. The months of May, June, July, August, September, and October brings not only the slow season within the tourist trade, but also hurricane season. With the high season coming to end what can a business do to stay a float?

Many hoteliers have reduced their rates, increased amenities or have offered discounts on food and beverage. Some were offering “bounce back coupons” earlier in the year or offering deep discounts on current stays; such as, buy five nights get two free. With the increase in fuel prices in the second and third quarters of 2008, airlines reduced their available seats and with the reduction of available seats have led to the increase of airfare based on supply and demand.

How do airfare and hotel rates affect small businesses in the Caribbean? With less traffic flow, the retail shops and eateries have less traffic which decreases their cash flow. With less cash flow the small business has to reduce their expenses and with labor being their easiest cost to reduce, the labor is cut which reduces the individual’s cash flow. When a business did not do well during high season, slow season is relied on by the locals and residents of the Caribbean to stay a float. With the labor’s cash flow, the local labor’s disposable income is reduced as well. What will happen in the slow season if the Caribbean has a reduced tourist flow and local residents have reduced disposable income?

With a hard year ahead, one must wonder what Carnival can do for the local economies in the Caribbean.  With Trinidad and Tobago wrapping up their 2009 Carnival Season, the expected impact to the local economies is expected to be around $30 million in total revenue. This is still higher than the economic impact of about $10 million in 2004.  So with the potential for a large economic impact to the local economy, one must wonder what it takes to put on a Carnival event.

First the government must support the event to start with since they gain the most out of the economic impact from Carnival. The Health, Police, Fire, Administration, and Public Works Departments, must ensure that all critical services will be maintained during the Carnival Event. Many businessmen and citizens who do not directly take part in Carnival fear that the government might not be able to handle the increase in demand for services from Carnival and maintain their regular day to day operations. Looking at past Carnivals throughout the Caribbean, one will see the spike in the need for Police and Health Services during the events. This is in part due to the rise in attendance and increased tourism during this period.

So once the government is all setup for what they need, Carnival then needs the assistance of media outlets to portray the event as a positive and inspiring event. This will increase tourism which will increase the economical impact of Carnival. While many media outlets cover the events during Carnival, the coverage of past years will also influence perspective attendees. From magazine companies to TV stations, the need to bring attention to Carnival is important. Many areas have adopted the Carnival theme which has been seen in Brooklyn, New York, Miami, Florida, and New Orleans, LA.

Now that you have the government on board, media attention, what is the missing piece that many attend Carnival for? Many attendees will say the music, food, parade, and costumes, but all of this can be summed up as the “vendors”… they make Carnival a reality. Most of the events are free to visitors, but with the purchase of food or crafts from vendors, this builds the funds of local merchants and allows for increase in disposable income throughout the year. The vendors play an integral part in Carnival as without their booths, cooking, crafts, or items, Carnival would not be able to generate the funds from the visitors. For many of vendors Carnival is their largest single event for producing cash flow to their small business.

With Carnival being a large portion of the economic success in the Caribbean Islands, we can see the reason why it has the potential to be the turning stone of the2009 economic future of the islands. Only time will tell as we will wait to see what the Carnival Season will bring to us in the Caribbean. Off to eating good pâtés, cold rum, and great music.

(Dustin P. Prudhomme is a contributor to Island Vibes Magazine and writes about Caribbean culture, business, and entertainment. For comments, please feel free to contact him at dustin@islandvibesmag.com.)